Court Held That Retirement Benefits Belonged To The Worker’s Sister, Who Was Designated Beneficiary, And Not The Wife

Winstead PC

In Estate of Gibson, a man named his sister as the beneficiary of his retirement plan in 1989. No. 06-17-00059-CV, 2017 Tex. App. LEXIS 9963 (Tex. App.—Texarkana October 13, 2017, no pet.). The man married in 2003, but failed to change the beneficiary designation. When he died in 2011, his wife, who was his executor, sued in probate court for a declaration that she was entitled to the benefits. The probate court disagreed, ordered that the benefits were not community property, and ordered that they were to go to the sister. The wife appealed.

The court of appeals disagreed with the probate court’s holding on separate property, but affirmed the judgment. The probate court’s conclusion of law stated that “[a]ny presumption that the TRS Plan Benefits were community property . . . w[as] rebutted by the proof, by clear and convincing evidence, of the beneficiary designation . . . .” Id. The wife argued that, because the plan benefits were in the possession of the man during their marriage, they were presumed to be community property and that the sister did not offer any evidence to overcome that presumption. The court of appeals held that “[d]eferred compensation plans, such as the TRS plan, are considered community property only to the extent they are attributable to the spouse’s employment during marriage.” Id. The court of appeals held that “that portion of the TRS plan benefits attributable to Gibson’s employment while he was married to Fox-Gibson is community property.” Id.

That did not end the inquiry. “Property passing at death pursuant to the terms of a contract, such as contributory retirement plans, are non-probate assets that are not subject to disposition by will or by the rules of intestate succession.” Id. (citing Valdez v. Ramirez, 574 S.W.2d 748, 750 (Tex. 1978)). The court held that the disposition of these assets is controlled by lifetime transfer rules. Id. While being earned by the employee spouse, the right to the benefits under the retirement plan is subject to the employee spouse’s sole management, control, and disposition. This includes the right to designate how the benefits will be paid, whether at retirement or in the event of the employee spouse’s death. “By statute, a TRS plan member may “designate one or more beneficiaries to receive benefits payable by [TRS] on the death of the member” and file it with TRS.” Id. (citing Tex. Gov’t Code Ann. § 824.101(a)).

Therefore, the probate court’s unchallenged findings of fact that “the TRS plan benefits are non-probate assets; that the TRS plan, to the extent it accrued benefits during the marriage of Gibson and Fox-Gibson, was the sole management community property of Gibson; that Gibson designated Ward as his plan beneficiary in June 1989; that the designation was never revoked, amended, or changed; and that at Gibson’s death the TRS plan benefits became payable to Ward” “are consistent with the Supreme Court’s holdings in Valdez.” Id. The court held that “since the probate court entered the proper judgment, its erroneous conclusion of law does not require reversal.” Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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